Everyone is aware of the housing market slowdown, the mortgage industry crisis, and the foreclosure rising rate, and must wonder, as we do, how it may affect us here in Woodside. And while the housing market in San Mateo County has not felt the impact of the nationwide mortgage crisis to the same extent as other areas of the state, slowing home sales may require the County and some cities to adjust their budgets next year. The simple truth is that the more houses that sell, the more taxes the County and cities collect.
Counties and cities have very constrained sources of revenue and many fixed expenditures and so they rely heavily on property and transfer taxes. In San Mateo County, the transfer tax is $1.10 per $1000 of the purchase price of all property sold in the County and, of course, when a house is sold, the property is generally reassessed, resulting in a higher property tax for that property. When home sales go down, not only is less transfer tax collected but the property taxes stay somewhat stagnant.
Some predict that property taxes could decline up to around $3 billion and transfer taxes could drop by $39 million state wide. Foreclosures in the County are up 28% and the volume of homes on the market is down 30 to 35%. As a comparison, in 2005 there were 7,878 home sales in San Mateo County, (that’s $8.6+ million dollars in just transfer taxes) while in 2007, there were only 5,249 home sales, a loss of almost $3 million in transfer tax revenue.
San Mateo County has moo-neuvered around the real estate crises so far, but will have to do some belt tightening. Cuts in the County budget are always painful and the County has started by implemented a hiring freeze in an attempt to gain control over rising personnel costs and a growing budget shortfall totaling $25 million. Freezing the 524 vacant County positions is the first step in keeping a balanced budget and heading off the full blown disaster that some cities and counties are now facing.
No one can predict where the real estate market is headed. Looking back at one of our previous stories, we noted the slump of home sales in Woodside. We wonder what these trends may do financially to our Town. Moreover, we keep hearing from COW’s that some people will not buy in the Town because of the reputation that it is difficult to remodel and, also, that a number of contractors, architects and other professionals will not work here (or charge more for working here). This should be a COW-ncern to all of us.